Partnerships

I remember a teaching moment during the 2008 recession that will forever be remembered.

It involved a partnership discussion on a slow-moving large land development I had brought money to. My friend and long-term managing partner, Bill Stonaker, was apologizing for the slow pace of selling pad sites and creating build-to-suits under the business plan.

The investor partner quickly intervened with the following wisdom. Before investing, they had independently reviewed the research and analysis, including the usual blue-sky, most-likely, and worst-case scenarios. And even with the best-laid plans, history shows unknown speed bumps occur that are ultimately viewed from the rear-view mirror rather than the proforma spreadsheet.

That said, the investor noted that the number one reason for investing was Bill's personal integrity, every bit as important as his well-known development knowledge. Cash-call assistance was immediately offered for any current or future shortfall. No further questions asked.

The project ultimately proved to be an absolute home run for all the investor partners.

Are you partnership material?

We have been involved in many safety-first partnership structures over the years. Before anything else, an honest look in the mirror helps (the article "We Are All Different" in this library is a good place to start). Then consider this list, whether you would be the managing partner or the more passive investor partner:

1. Always add more value than your partners
2. Always add more value than you take
3. Don't resent your partners because you add more value (very difficult)
4. Only partner with those who share common goals for the partnership
5. Integrity matters
6. Make sure the profit is enough to pay the bills and to pay the partners
7. If you don't like or respect them, don't partner with them
8. Communicate, communicate, communicate
9. Bad news should be delivered immediately, and if possible in person
10. Good news can wait until tomorrow
11. Share your knowledge
12. Review and renew the partnership goals; things change
13. Counsel your partners, and let them counsel you
14. Have an exit strategy
15. Have a liquidation date
16. Have a divorce agreement for when things go wrong
17. Everyone should be adding value
18. Listen first, talk second
19. Money is cheap; talent adds value
20. Pay according to work performed, cash if possible, equity if not
21. Loan guarantees are worth much more than most people value them
22. Be fair, to them and to yourself
23. Have fun

In the end, observing the above should help render a solid, profitable investment.